Consumer index drops

Consumer prices fell unexpectedly last month after rising for six straight months as both fruit and clothing costs fell, a statement by the Directorate General of Budget, Accounting and Statistics (DGBAS) said yesterday.

The consumer price index fell a seasonally adjusted 0.08 percent from August, the bureau said. Compared to a year earlier, when prices rose 3.12 percent after rising 3.59 percent in August, the statistics bureau said.

Falling consumer prices may lessen pressure on the nation's central bank to lift its benchmark interest rates for a sixth straight quarter after it said on Sept 15, when it last raised rates, that inflation may exceed the government's 2 percent forecast for this year in the wake of heavy amounts of typhoon damage and higher oil costs.

"Consumer prices will likely ease in coming months," as vegetable prices are expected to remain stable now that the typhoon season is ending, said Cheng Cheng-mount (鄭貞茂), chief economist at Citibank Taiwan Ltd in Taipei. "Fuel prices may fall after the government lowered commodity taxes on oil products" for three months beginning in October.

Without the seasonal factor included, the price index rose 0.09 percent in September from the previous month.

The September wholesale price index fell 0.16 percent year-on-year, but was up a seasonally adjusted 1.00 percent month-on-month, the DGBAS said.

For the nine months to September, prices rose 2.24 percent from a year earlier, with the core price index up 0.69 percent and the wholesale price index rising 0.52 percent.

"The CPI growth of 2.24 percent for the first nine months of this year marked the highest level in nine years," DGBAS section chief Wu Chung-ming (吳昭明) told reporters. "But there is still an opportunity for full-year CPI growth to meet the government's target of less than 2 percent for the year."

With utility and gasoline prices likely to stay stable in the fourth quarter, food prices in the current quarter are expected to fall from a year earlier.

"The fourth quarter is usually a season for abundant supply of vegetables, assuming there are no major natural disasters," Wu said

The official blamed increases in food prices in the first nine months for the high CPI growth as core prices in the same period only rose 0.69 percent.

Food prices rose first due to cold weather, then flooding and typhoons.

Earlier yesterday, Premier Frank Hsieh (謝長廷) gave the state-run Taiwan Power Co (Taipower, 台電) several directives aimed at lowering its overheads and electricity generation costs so as to help alleviate the pressure for power rate hikes.

Hsieh said he wants Taipower to lower its power plants' installation capacity rate from the current 20 percent of reserve margin to 16 percent, a move which he said could save the company some NT$40 billion (US$1.2 billion).

The premier also suggested that Taipower adjust its co-generation payment structure on its purchases of electricity from private power generators to further cut costs. The buying rates should be calculated based on fuel variety instead of on kilowatt hours, he said.

Furthermore, Hsieh said, Taipower should also seek to improve or overhaul its power distribution systems nationwide to reduce unnecessary waste in power consumption.